Victoria on Target - Renewable Energy Update

On 11 September 2018, the State government announced the successful renewable energy project bidders from the Victorian Renewable Energy Auction Scheme (VREAS).

The six projects, featuring three wind and three solar farms, are expected to be operational in 2020, and once operational, will reportedly deliver 928 megawatts (MW) of renewable energy capacity to Victoria. The government has flagged that the VREAS will set the State on the pathway to meet its renewable energy targets.[1] But just how well is Victoria tracking against its targets?

Victoria's renewable energy targets

The Victorian Government was the first state or territory to pass its renewable energy targets into law with the Renewable Energy (Jobs and Investment) Act 2017 (Vic) ("Act"). The Act, which was part of a package of reforms, formally established two renewable energy targets for 2020 and 2025 respectively. Importantly, the targets are expressed in terms of how much energy is being generatedby renewable sources.

Generation and capacity

Under section 7 of the Act, 25% of the electricity in Victoria must be generatedfrom renewable energy sources by 2020, and 40% generated by 2025 ("Generation Targets").

When the Generation Targets were announced in June 2016, renewable energy accounted for approximately 17% of Victoria’s electricity generation.[2]

Whilst the Generation Targets are expressed in terms of energy generation, the mechanism within the Act to chart Victoria’s progress against the Generation Targets is expressed in terms of capacity(known as “capacity determinations” within the Act).

On 28 December last year, the Minister announced that the minimum amount of renewable energy generation capacitythat would be required to meet the 25% 2020 Generation Target was 6,341 MW ("2020 Capacity Determination").

According to the Victorian electricity generation reports provided by the Australian Energy Market Operator (AEMO), as at July this year Victoria’s (operational) renewable energy capacitytotalled 3,978 MW.

With approximately 3,320 MW of new renewable energy developments having an expected full commercial use date by 2020, on the assumption that reaching the 2020 Capacity Determination will result in Victoria achieving its 2020 Generation Target, Victoria seems to be well on the way to meeting the 2020 Generation Target.

Comment

Capacityis the maximum instantaneous power that a power plant can produce and is expressed in megawatts (MW), while the total electricity they actually generateover a period of time is expressed in megawatt hours (MWh). For example, a solar farm rated at a power level of 10 MW capacity can potentiallygenerate 10MWh of electrical energy over an hour in optimal conditions. Over 6 hours in optimal sunny conditions the 10 MW solar farm could generate 60 MWh of energy.[3]

While completed renewable energy projects, including those arising out of the VREAS, will go a long way toward reaching the Generation Targets, by far the most significant event to occur since announcing the Generation Targets – both in terms of capacity and generation – was the closure of the Hazlewood Power Station. The Hazlewood Power Station had a capacity of 1,600 MW[4] and in 2016 produced 10,326 GWh (22% of Victoria’s operational demand).[5]

The AEMO’s data indicates the decommissioning of the Hazlewood Power Station caused an approximate 6% increase in Victoria’s percentage of renewable energy capacity relative to Victoria’s total energy capacity:

Figure 1: Based on the Victorian generation reports from AEMO

Publication Date

Total energy capacity (MW)

Total renewable energy capacity (MW)*

% renewable energy capacity

27-Feb-17

12,276

3,598

29.3%

5-Jun-17

10,921

3,830

35.1%

*Total renewable energy capacity includes the total existing capacities for Biomass, Water, Solar and Wind

If the effect of closure of the Hazlewood Power Station on total generation capacityis any indication, the loss of electricity generationfrom the Hazlewood Power Station’s closure will likely have a significant bearing on Victoria’s ability to meet its Generation Targets.

While the announcement of the six renewable energy projects arising out of the VREAS is a welcome initiative, it cannot be ignored that the closure of the Hazlewood Power Station, several months after the announcement of the Generation Targets, will perhaps be the single biggest contributing factor if (or when) Victoria achieves the 2020 Generation Target.

Decommissioning coal-fired power plants, in conjunction with supporting new renewable energy projects, should continue to be the focus. This approach will not only result in Victoria reaching its Generation Targets, but it will assist Australia in reaching its nationally determined contribution under the Paris Agreement.

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